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Wednesday, March 28, 2012

Where Are the Aluminum Speculators?

Click to enlarge.

How are we going to hyperinflate if we can't even get aluminum prices to rise much faster than the modest increases in the consumer price index?

Click to enlarge.

On the other hand, if the world wishes to continue to hyperinflate gold, I'm fine with that. Just count me out. I have no need for gold personally. Even the gold crowns in my mouth no longer exist.Hedonicallyspeaking, they were substituted.

Gold trades at $1,823.20 per troy ounce. Aluminum trades at $1.0376 per pound. There are 14.5833333 troy ounces in a pound. The current gold to aluminum price ratio is therefore a whopping 25,625 to 1.

...

Selling just 5.74 pounds of gold will now allow you to buy all the aluminum needed to make a 747-400.

Gold now trades at $1,662.10 per troy ounce. Aluminum trades at $0.9594 per pound. The current gold to aluminum price ratio is still a whopping 25,264 to 1.

Gold finally appears to be losing some exponential growth momentum compared to aluminum (in addition to its 9% price drop since the last update 7 months ago). It now takes 5.82 pounds of gold to buy all the aluminum needed to make a 747-400.

I owned gold from 2004 to 2006. It treated me well. I have absolutely no desire to own it at anywhere near these prices. I do have an aluminum foil hoard though. Heck, why not? If you look close, it is just to the left of the garbage bags. I may need to buy more foil in 30 years, so keep that in mind if you are planning to invest in Alcoa, lol. Sigh.

As a side note, the petroleum based garbage bags are now up about 30%. Everything else in the picture is inflating modestly. I have no complaints. As silly as this picture looks in a low inflation environment, it has still outperformed buried cash, treasury bills, and savings accounts. What more could I ask of a relatively risk-free investment?

14 comments:

AllanF
said...

That photo always cracks me up.

Just curious, have you done the math on those garbage bags? I reckon for a single male you have about 12 +/- 40 years worth of garbage bags there.

A few years ago my parents were visiting and insisted on making a Costco run with my wife. They bought a box of either 100 or 200 kitchen garbage bags. I mocked them roundly since we went through all of 1/wk. Our family has grown since then and we are now up to 2/wk.

I joke that all the money saved at Costco is wasted on buying trash bags. If you shop at a normal grocery store they give you bags which can then be used for the trash. Which I do (on principle!) whenever my wife takes the kids out of town and I stay behind. I _barely_ fill 1/2 a single grocery bag in a week.

Further, conservation of matter dictates whatever comes into the house in grocery bag must necessarily be able to leave the house in the very same grocery bag. Allowing for our city sewer hook-up we cannot not have a surplus of grocery bags. My wife for reasons known only to her refuses to be swayed by classical physics.

I have. I'm pretty much at my absolute limit now (16 costco boxes which is a bit more than pictured).

There are actually two of us (girlfriend) plus a cat (litter box). The cat is 17 years old though. We're currently using 3 bags per week but should eventually drop to 2.

We eat at home a lot more than most and I'm home nearly all day, every day. That tends to up the garbage. We also have a bird. Ounce for ounce, a bird is a garbage generating machine.

Long-term, I'd say 2 bags per week. That's about 2 years per box. I therefore have about 32 years worth, lol.

That should last me until I'm 79 years old, which just happens to be roughly my life expectancy (not a coincidence).

And speaking of the bird, you should see how much my Kleenex hoard has grown. I'm at my limit there too. Believe me, lol.

It's all about the math. Doesn't mean I can't estimate poorly as conditions change though, but hey, at least I try. :)

I joke that all the money saved at Costco is wasted on buying trash bags. If you shop at a normal grocery store they give you bags which can then be used for the trash.

Amusing. There is a hint of truth in that. No doubt about it. Heck, I don't even take boxes home with me when I shop at Costco. That means the cheaper shoes I buy there wear out faster (since I have to make multiple trips to unload my car). Hahaha! :)

And here's my biggest concern, if you can call it that. I intend on living in this house permanently. There is a risk I will move though, and the thought of loading up a moving truck with toilet paper and garbage bags doesn't appeal to me all that much. Go figure.

But that is understating things, since participation is more like 70%.

In 2030 there will be 1.09 dependents per actual worker, assuming there will in fact be 145M jobs in 2030.

The FDR/LBJ/GWB goodie box costs around $40,000/yr per recipient, and in 2030 me & you will be one of 70M+ recipients. Plus another $10,000 per student.

There will be roughly 0.5 retirees per worker and 0.6 students, for a gross per-worker burden in 2030 of $26,000/yr off the top.

Unless they invent more hours in the day, on a 1700hr workyear that's $15/hr for every worker in the country.

Granted, with all these dependents, there's going to be a lot more jobs tending to the old and young, but of course that is not exactly wealth-accreting, other than if we don't raise our kids well enough to run the machines after us, there would be productivity drops.

All this just screams deflation in housing to me. It's still got a lot of valuation to be beaten out of it. So does the health care sector, but ISTM they have the power to withhold services more than housing owners, whose product is already done been built.

If these charts have any merit, then silver is either in a bubble or silver has priced in a great deal of future pain for savers. Perhaps hindsight will show that it was a bit of both? It's just one more reason I've been willing to buy 30-year TIPS.

All I tried to do was point out how a silver bubble could form. That's all. In hindsight, 30-year TIPS did much, much better.

Check out the comments. I was heckled when silver hit $45. Not the best of timing.

Very few people on this earth understand SilverAs I write this, Silver is at $45, up $15 bucks since this article was written just eight weeks ago.The internet is a wonderful thing. You can find articles written over the past few years saying silver was overbought at $12, at $15, at $18, at $20 at $30.. The long awaited correction the "experts" keep warning us about never comes.

None of these "experts" understand the first thing about what is driving silver. - Anonymous

I offered the following two-part reply that same day (when silver was $45).

This post was intended to show how a silver bubble is formed. I'd say that since silver is up 33% in just 8 weeks the article still has merit.

I would also point out that you have decided to capitalize silver as if it is a holy metal worthy of our worship. That would imply to me that you think silver is good at any price. Time will tell.

Schoolchildren per actual-worker was 0.4, 66% of 2030's projection.Old duffers were 0.2, 40% of what 2030 brings.

This is why I'd rather have Japan's demographics than ours. They may have 7.5M more old people in 2050 than now, but they're also going to have 7.5 million less young people too.

Mainstream economics considers "lump of labor" understandings (that there is just a fixed amount of work to go around) to be fallacious, but with the general U-6 and resources situation I'd rather have fewer mouths to feed going forward than more.

In 2030 this nation could possibly have over 10M more kids than now.

Are these 10 million bonus kids going to give us more Bill Gates types, or just more trouble?

G-d help us CA taxpayers if we're on the hook for the ~$400B in pension underfunding, too. That bill is payable over 40 years or whatever but a $1000/yr taxpayer hit would be rather best-case I would think.

I've been thinking about buying a house this year or next but the future is just too damn scary.

Disclaimer

I am not a financial advisor. I am not offering investment advice. Although I have attempted to provide accurate information, that's all it is, an attempt. Please do not trust the opinions, numbers, and/or charts of a random anonymous blogger on the Internet. Make your own opinions. Make your own charts. Do your own due diligence. Thank you.